GOP Responses To Jobs Report Ignore Main Obstacle To Growth

November 04, 2011 3:05 pm ET

With the news this morning that the private economy added 104,000 jobs but the public sector shed 24,000, prominent Republicans had a chance to trot out the same tired, debunked explanation for slow economic growth they've been using throughout the Obama presidency. According to the GOP, job creators are not hiring because of regulations and high spending from Washington, D.C. But according to the job creators themselves, regulations, taxes and spending are not the issue — they simply don't have enough customers to justify expanding their workforces. The problem continues to be weak demand.

GOP: Job
Creators Are Stifled By Regulations, Taxes, And Spending

Mitt Romney Blamed
"President Obama's Reckless Spending" For Putting A Leash On The American
Economy. From Mitt Romney's statement on the October jobs numbers: "President Obama's reckless spending and
trillion dollar deficits are hurting this economy and stifling job growth.
Today's employment report is a reminder that America continues to face a jobs
crisis of historic proportions. At this rate, it will take years to get back
the jobs that have been lost under President Obama. October marked the
thirty-third consecutive month that the unemployment rate has been above 8%. It is time to once again unleash the
tremendous economic potential of the American people, but that can't happen
until President Obama is defeated." [Romney Statement, 11/4/11,
emphasis added]

Rep.
Cantor Blamed "Washington Overreach And Overregulation" For Slow Job Growth. From House Majority
Leader Eric Cantor's (R-VA) statement on the October jobs numbers: "At a time when
the future of our country's economy is uncertain, we need to be doing
everything we can to create an environment where small businesses can grow so
people can get back to work. Today's jobs numbers show little improvement, and
with high unemployment forecast in the year ahead, we must set aside our
differences and focus on areas of common ground to create jobs. [...] We are a country that is built on the
promise of opportunity and success for all, but right now the uncertainty
created by Washington overreach and overregulation is costing jobs and
crippling growth. House Republicans are working to remove these barriers
and produce an environment where job creators can succeed. It's time for the
divisive rhetoric and the constant campaigning to be put aside, so that we can
deliver results for the people who are hurting right now." [Cantor Statement, 11/4/11, emphasis added]

Speaker
Boehner Blamed "The Government Barriers Holding Back Robust Private-Sector Job
Creation" For Slow Job Growth. From
Speaker John Boehner's (R-OH) statement on the October jobs numbers: "More than two years after the 'stimulus' was enacted the American
people are still asking the question, 'where are the jobs?' It's time to close the book on the failed 'stimulus' era in
Washington, and start working together to remove the government barriers
holding back robust private-sector job creation and long-term economic growth." [Boehner
Statement, 11/4/11, emphasis added]

RNC Chairman Priebus
Blamed "Over-Regulation, Tax Threats, And Reckless Spending" For Slow Job
Growth. From Republican National Committee Chairman Reince Priebus'
statement on the October jobs numbers: "While President Obama spent October on
the campaign trail, the American people endured another month of unacceptably
high unemployment. Today's jobs
numbers underscore the devastating toll President Obama's record of
over-regulation, tax threats and reckless spending has taken on the American
economy. As millions of Americans struggle to find work, the poverty
level has reached a record high, wages have fallen and the housing crisis
continues to get worse. Instead of pushing costly spending programs that would do little to spur job creation,
President Obama and Senate Democrats should take up the more than 15
pro-growth bills House Republicans have passed since January. Americans
deserve a President who prioritizes recovery over re-election and in 2012
voters will have the chance to elect one." [Priebus Statement, 11/4/11,
emphasis added]

Rick Perry Blamed
"Uncertainty And Excessive Taxes And Regulations" For Slow Job Growth. From
Gov. Rick Perry's (R-TX) statement on the October jobs numbers: "Today's jobs report
showing the lowest growth in four months proves that American employers remain burdened by uncertainty and excessive taxes
and regulations. American workers and taxpayers need a president committed
to private sector job creation and fiscal sanity in Washington, D.C. As
president, I will fundamentally change Washington by cutting taxes to a low,
flat 20 percent, cutting federal spending and regulations, and ending bailouts
to protect taxpayers and jumpstart American job creation." [Perry Statement, 11/4/11,
emphasis added]

Job
Creators: It's The Demand

McClatchy: Small Business
Owners Not Worried About Regulations. As reported by McClatchy:

Politicians and business groups
often blame excessive regulation and fear of higher taxes for tepid hiring in
the economy. However, little evidence of that emerged when McClatchy canvassed
a random sample of small business owners across the nation.

"Government regulations
are not 'choking' our business, the hospitality business," Bernard
Wolfson, the president of Hospitality Operations in Miami, told The Miami
Herald. "In order to do business in today's environment, government
regulations are necessary and we must deal with them. The health and safety of
our guests depend on regulations. It is the government regulations that help
keep things in order." [...]

McClatchy reached out to owners
of small businesses, many of them mom-and-pop operations, to find out whether
they indeed were being choked by regulation, whether uncertainty over taxes
affected their hiring plans and whether the health care overhaul was helping or
hurting their business.

Their response was surprising.

None of the business owners complained
about regulation in their particular industries, and most seemed to welcome it.
Some pointed to the lack of regulation in mortgage lending as a principal cause
of the financial crisis that brought about the Great Recession of 2007-09 and
its grim aftermath. [McClatchy, 9/1/11]

Wall Street Journal:
Despite Massive Cash Reserves, Business Not Hiring Because Debt Reduction
Stifling Demand. As
reported by the Wall Street Journal:
"Corporations have a higher share of cash on their balance sheets than at
any time in nearly half a century, as businesses build up buffers rather than
invest in new plants or hiring. [...] The reduction of debt could place the
economy onto firmer footing in the long run. In the short term, however, the effect
of consumers paying off debts and companies hoarding cash is less spending,
investing and hiring. Economists
call this problem the 'paradox of thrift,' when individuals and businesses need
to save more to prepare for a downturn, but everyone doing so at the same time
makes a downturn more likely. 'For one household or business to save money is a
good thing,' said Dana Saporta, an economist with Credit Suisse in New York.
'For everyone to be doing this at the same time could serve to slow economic
growth.'" [Wall Street
Journal, 9/17/11,
emphasis added]

Wall Street Journal:
"The Main Reason" For Hiring Reluctance Is "Scant Demand, Rather
Than Uncertainty Over Government Policies." According
to the Wall Street
Journal:

The main reason U.S. companies
are reluctant to step up hiring is scant demand, rather than uncertainty over
government policies, according to a majority of economists in a new Wall Street
Journal survey.

"There is no demand,"
said Paul Ashworth of Capital Economics. "Businesses aren't confident
enough, and the longer this goes on the harder it is to convince them that they
should be."

In the survey, conducted July 8-13 and
released Monday, 53 economists-not all of whom answer every question-were asked
the main reason employers aren't hiring more readily. Of the 51 who responded to the
question, 31 cited lack of demand (65%) and 14 (27%) cited uncertainty about
government policy. The others said hiring overseas was
more appealing. [Wall Street
Journal, 7/18/11,
emphasis added]

Wall Street Journal:
Despite Improving Profits, It Will Take "A Burst In Demand" To
"Propel Hiring." As
reported by the Wall Street Journal:
"Corporate profits rose an estimated 3% in the second quarter from the
first, better than the 1% improvement in the first three months of the year,
the Commerce Department said Friday. Profits were up more than 8% from last
year's second quarter. The domestic nonfinancial sector drove most of the
growth, as financial profits declined. [...]Forecasting firm Macroeconomic
Advisers, which sees growth at a 2.3% pace in the second half of this year and
2.8% in 2012, expects firms to keep banking strong profits. But
even if businesses remain strong enough to make it through a slowdown, they may
have to wait longer for a burst in demand strong enough to propel hiring."
[Wall Street Journal, 8/29/11,
emphasis added]

"The Biggest Problem"
For Companies "Is That Their Order Books Are Thin." As reported by theWall
Street Journal: "'The biggest problem is that their order
books are thin,' said Macroeconomic Advisers chairman Joel Prakken. 'They need
fat order books to add people. They need fat order books to buy
machines.'" [Wall
Street Journal, 8/29/11]

Washington Post: Executives
Can't Draw Specific Link Between Government Actions And Hiring Decisions. According
to the Washington Post:
"Fundamentally, executives objected to Obama's policies on the grounds
they would make the United States a less competitive place to operate in the
long run. But when [manufacturing CEO Jason] Speer and other executives were
pressed on the role that tax and regulatory policies play in hiring, they drew
only vague connections. Speer
said his decision whether to hire is driven primarily by demand for his
products. Orders are coming in strong enough that he is
running about 20 hours a week of overtime. So he is weighing whether to hire
two or three additional manufacturing workers. None of the executives interviewed
linked a specific new government initiative with a specific decision to refrain
from hiring." [Washington
Post, 8/21/10,
emphasis added]

Study By "The Most Right
Wing Of The Major Business Groups" Shows Businesses Much More Afraid Of
Weak Demand Than Taxes And Regulations. As Ezra Klein of
the Washington
Post reported:

The National Federation of
Independent Businesses -- a small-business trade association that is considered
the most right wing of the major business groups -- continually polls its
members and releases the results. Here's what they say is their single most
important problem:

As you can see, sales - that is
to say, demand for their products - dominate the chart, while fear of taxes is
lower than in the '90s. The concern over sales is understandable. Not only is
the economy bad. But as the next chart shows, it keeps underperforming what the
businesses assume will happen.

So, if
anything, businesses have been too optimistic over the past few years. [Washington Post, 7/22/10]